Checkered flag in sight?

An article in The Herald Sun today says that as John Brumby signals a review of the Grand Prix, Neil Wilson discovers the troubled motor race is still a pillar of Victoria’s major events strategy.

Melbourne’s first Formula One Grand Prix was run the weekend after John Howard was elected in 1996, however like the Coalition’s opinion poll ratings, many Victorians are wondering whether a case of public boredom or fatigue means both might run out of petrol.

Premier John Brumby’s comment that the GP had to pay for itself reflected an increased scrutiny of the event’s part as one of the four pillars of the state’s pioneering major events strategy.

Unlike the Spring Racing Carnival, the AFL Grand Final and the Australian Open tennis, the Formula One Grand Prix is the only event for which the state must pay a fat staging fee out of the economy.

Formula One Management owner Bernie Ecclestone takes about half the fee, with the rest going to the competing teams. The Save Albert Park group says it has information that the licence fee was $28 million in 2007 but will climb to $42 million by 2010.

If you think that’s fanciful, Valencia in Spain has agreed to pay $42.2 million and Bahrain $63 million.

Mr Ecclestone is ruthless at playing off bidders for his GP circus: his latest elaborate demand is that the Melbourne race be under lights for better TV timing in Europe.

When then-premier Jeff Kennett appeared in a checkered jacket to wave off the cars in 1996, 401,000 Victorians fascinated with the novelty of the event flocked to Albert Park. There was also major events chief Ron Walker assuring everyone that Melbourne had gained an incredible marketing coup, the city watched by 360 million television viewers in 132 nations.

However as crowds settled back to 330,000, then dropping to 301,000 after the 2006 Commonwealth Games, there was some wariness the car wheels weren’t the only spin.

This year, the official crowd reportedly stabilised at just over 300,000, yet the loss somehow blew out from $21.2 million in 2006 to $34.6 million.

Despite the $34.6 million taxpayers lost on the event, there was the $175 million of economic activity it generated, according to analysis done for the State Government.

In May this year, Auditor-General Des Pearson, sparked debate with the National Institute for Economic and Industry Research when he disputed that, with Mr Pearson putting the economic benefit at $62 million, with direct costs exceeding benefit by $6.2 million.

But the problem for Mr Pearson, as with media trying to find the event’s true bottom line, is that detail was hidden behind confidentiality clauses in contracts involving the GP Corporation and the state.

He admitted “major information gaps” and was attacked by the GP Corporation for failing to include civic pride, business investment and international recognition.

But how do you put a price on these, any more than you can reliably include noise pollution and traffic congestion costs Mr Pearson factored in?

These are the “intangibles” that can put analysis off-track and subject to spin.

While Ron Walker consistently said there were 360 million TV viewers, Bernie Ecclestone’s Formula One Management put the 2004 figure at 82.247 million.

Next year, the start time will be put forward to 3.30pm to attract more of the main European audience, but what difference does the race starting at 4.30am make to it starting at 3.00am for sleeping Europeans?

The intangibles turn the GP excitement and high speed into an economic impact debate, with the state reportedly expecting a 10:1 return ratio from major events.

Dr Peter Brain, head economic analyst for the National Institute for Economic and Industry Research, said the GP was still meeting that test in 2005.

He leads many experts who say it is essential the GP be seen in the wider context of the state’s crucial major events strategy.

“The whole is greater than its parts, but the GP is a hook that people know they can work other programs and events around,” Dr Brain said.

“Hotels know they’ll have four good months, so they can discount rooms at other times.” “The four pillars add far more than their sum.”

He points out the GP has increased building of hotel rooms in Melbourne by about 8 per cent, adding, “It has got to the point where they have to judge whether it’s better to put state funds into something with a low return but good for community wellbeing or do they put it into the GP.” “Do we put it into roads, toilet blocks in Wycheproof or pour it into a GP – that can really only be a political decision.

“If we lose the GP then it’s a sign that Melbourne has lost its competitive edge and we’ll have to find something comparable.”

Dr Brain’s colleague, Peter Hylands, says that major event visitor numbers have grown by a healthy 2-3 per cent in recent years.

The consistency, quality and number of events staged in Melbourne is an attraction in itself, winning events even though it often bids less than rival cities.

It is believed the city’s bid for the 2011 President’s Cup was $10 million less than Singapore’s, but it won.

Victorian Employers Chamber of Commerce and Industry chief Wayne Kayler-Thomson said Victorians’ love of sport was a unique advantage.

He said intangible benefits came from it, such as the public transport co-ordination learned for the GP, which was vital in getting Melbourne to work the day after the Burnley tunnel disaster.

As head of the Victoria Events Industry Council, Mr Kayler-Thomson points to firms such as Cleanevent that have grown into an international firm from starting at the Melbourne GP.

Competition is the key, as other Australian cities and fierce rivals such as Dubai and Abu Dhabi in the Gulf or Shanghai and Singapore in east Asia try to emulate Melbourne’s pioneering major events strategy, worth $1.4 billion a year.

They, like Melbourne, do not have the natural beauty of a Sydney to attract tourism.

Melbourne is trying to regain its regional lead in the convention market with the building of the $403 million Convention Centre for 2009, which will feed into the events market, as will the new hotels around the Crown complex.

Nearly 70 international conventions add about 22,500 jobs to the state economy annually, with the Government’s major events budget allocation $55 million a year.

The GP itself added 3,615 equivalent jobs in 2005.

But there are plenty of dissenters.

Monash University economist Dr Ross Booth says there is scant evidence that an event like the GP has any economic impact once “leakages” are factored in.

He said if it did not exist, then Victorians making two-thirds of the crowd would spend money on other events. The Melburnians who left town or were deterred from shopping by the GP added to the money Mr Ecclestone’s fee drained.

Independent economist Francis Grey, who has done two reports for Save Albert Park, says he can find no evidence of claims the GP increased tourism by $8.1 million in 2001.

“There’s nothing wrong with a nice party, just don’t tell people it’s a $100 million-plus party when it’s only about $8 million,” Mr Grey says.

But the chief executive of the Victorian Major Events Company, Brendan McClements, says the GP is one of the pillars supporting the whole structure of the state’s events strategy. “Sir Rod Eddington (VMEC chairman) has said each event has to pay its way.” “It is one event, but I don’t think there’s anything on the world stage which could replace it,” he said.

Mr McClements said if people wished to gauge the value of a strategy, they only had to look at the Exhibition Building, a huge project for the 1888 International Exhibition. “The legacy of the strategy at that time is with us today, it has World Heritage listing, there’s the Melbourne Museum in the grounds, and the flower and garden show every year,” he said.

GP Corporation chief Drew Ward has big plans for next year with the re-introduction of the V8 Supercars and revamped entertainment with a world headline act.

Mr McClements said: “It is incredibly competitive, you have cities from the Gulf, you have Singapore, so Melbourne has to consider its GP very carefully, “I’m not saying it’s irreplaceable, but there’s nothing like it.”

A Report by The Mole from The Sun Herald